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Thatcher's New Poll Tax: The Beginning of Her End? : Britain: A tax, intended to target the Conservative Party's enemies, has instead alienated constituencies on all sides.

April 01, 1990|Michael Elliott | Michael Elliott is the Washington bureau chief for the Economist.

WASHINGTON — A month short of her 11th anniversary as Britain's prime minister--a record of unbroken power not seen for more than a century--Margaret Thatcher is on the ropes.

On March 22, her Conservative Party lost a special election in its political heartland. The swing to the opposition Labor Party was the biggest in more than 50 years. Opinion polls last weekend showed the Conservatives running from 19% to 38% behind Labor. Translated into seats at a general election--which does not have to be held until summer, 1992--those figures would give Labor the kind of overwhelming majority in the House of Commons it has had only twice before. And, incidentally, the figures mean Thatcher would lose in her own North London district.

How has she gotten into this mess? Explanations are two-a-penny. People are fed up with her and her bullying. Politicos in Britain call this the "TBW" factor, "that bloody woman"--what people say about her when asked on their doorsteps. Running close is the "SGTF" factor, "she's gone too far"--a reference to her privatization last year of the publicly owned water and electric industries. The economy is having a rocky year. Inflation is heading for 9%. Interest rates are around 15% and, in a country where more than 60% of families own their own homes and almost all mortgages are at a floating rate, high interest rates have a direct pocketbook effect. But ask most Britons what most explains madam's unpopularity, and they will say "the poll tax." And thereby hangs a tale.

At one level, it is a technical tale about local government finance, the quickest way known of emptying dinner parties. Fortunately, it can be briefly told. For many years, Britain financed local government with a mixture of grants from the central government and "the rates." The rates are property taxes, raised much as they are in this country. Property is periodically valued, and the tax then levied by the local government.

One section of the Conservative Party has always complained about the rates. It said they were a tax on responsible homeowners--i.e., themselves--so money could be spent on feckless tenants of public housing--i.e., the Great Unwashed, those who vote Labor. And indeed, since public-housing tenants did not pay rates, but consumed a disproportionate amount of local government services, the Conservatives had--as they say in Britain--half a point.

Thatcher thought so, at any rate, and long before becoming prime minister she promised that when next they came to power, Conservatives would abolish the rates. Easier said than done. Throughout most of the 1980s, successive working parties looked at the alternatives, only to reject them. A local income tax was ruled out because Thatcher does not like income tax of any kind. A local sales tax was ruled out because of its effect on inflation. Reforming the rates (the sensible option because they are easy to collect, progressive and a relatively painless proxy for a tax on wealth) was rejected because Thatcher had not promised to reform rates--she had promised to abolish them.

So she did, replacing them with what she likes to call the "community charge" but which everyone else calls the poll tax. For it will serve as one: Those who do not register for the tax will not be able to register to vote. The poll tax is levied at a flat rate for all adults, irrespective of income levels or form of housing. Thus the wealthy--say, Prince Charles--will pay no more than those struggling to make ends meet--my widowed aunts in Liverpool, for example--though there are rebates for those in poverty.

Thatcher shrieks that the poll tax is more fair than the rates, since it means everybody pays something for local services, whereas before some paid nothing. But as changing the system has created more losers than winners--the poll tax takes effect today--all she can do is stuff the mouths of the losers with silver and pray that, in a year or two, everybody will have forgotten that ability to pay is a useful principle when designing a new tax.

Yet this technical explanation of what the poll tax is and why Thatcher introduced it tells less than half the story. It fails to explain why she should have taken such a huge risk with a tax almost designed to be politically unpopular. The answer lies in some aspects of British society little understood in America.

Throughout the 1960s, young Britons and Americans played the same music, smoked the same dope, sat-in, loved-in and taught-in in the same ways. So it was easy to think the political fallout from the 1960s must have been similar in the two countries. But it wasn't. American baby-boomers gave up listening to Jefferson Airplane and started writing scripts for Brandon Tartikoff. However much they may have rebelled in their youth, they rarely challenged the basic American dream to get ahead and be good capitalists. They supported Gary Hart in 1984 and Albert Gore Jr. in 1988, which is really, like, daring.

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